GEOGRAPHYThe Principality of Liechtenstein is located in central Europe between Switzerland and Austria, in the Alps Mountain range that runs east and west through southern Switzerland. One-third of the country lies in the upper Rhine Valley; the rest is mountainous.

PEOPLEIn 1988, Liechtenstein had a population of 27,825 with an annual growth rate of about 0.89%. The population density for the country as a whole is more than 166 persons per square kilometer (416/sq. mi.). About 18% of the people live in Valduz, the capital; most of the remainder live in 10 other communities in the Rhine Valley. The social structure of the principality is similar to that of other modern industrialized Western communities, except for the survival of the aristocratic ruling family, the House of Liechtenstein.

The population is homogeneous, stemming almost entirely from a Germanic tribe, the Alemanni. The official language is German, but most Liechtensteiners speak Alemannic, a German dialect similar to that used in eastern Switzerland.

HISTORYBecause of its strategic location on a north-south and east-west crossroads in central Europe, Liechtenstein has been permanently inhabited since the Neolithic Age. Recorded inhabitants include the Celts, the Romans, and later the Alemanni. The area became a direct fief of the Holy Roman Empire in 1396.

The Imperial Principality of Liechtenstein was established in 1719, when the princely House of Liechtenstein, in order to maintain a seat in the Imperial Diet of the Holy Roman Empire, purchased the territory and gave its name to the principality.

Liechtenstein was a member of the Confederation of the Rhine during the Napoleonic period and later became a member of the German confederation until its dissolution in 1866. The Austro-Prussian War of 1866 was the last time Leichtenstein fielded an army--80 men.

Although it has been politically independent since 1815, Liechtenstein joined a customs union with the Austro-Hungarian Empire in 1852. It abrogated this treaty with Austria in 1919. The principality remained neutral in both World Wars. The most important date in recent Liechtenstein history is 1923, when the Swiss Liechtenstein Customs Treaty was signed, establishing relationship that has been updated and improved by subsequent agreements.

GOVERNMENT AND POLITICAL CONDITIONSBased on the constitution of October 1921, the Principality of Liechtenstein is a hereditary constitutional monarchy. The prince is head of the House of Leichtenstein and thereby chief of state; all legislation must have his concurrence. He also is empowered to dissolve the Diet (parliament). Traditional popular loyalty to the monarchy has assured the stability of the constitutional system.

The highest executive authority of the principality is a five-member Collegial Board (cabinet). Its chairman is the head of government (prime minister), appointed to the position by the prince after being proposed by the Diet from among the members of the majority party. The deputy head of government, traditionally a member of the minority political party, also is appointed by the prince after being proposed by the Diet.

The three other members of the collegial Board, called government councilors are proposed by the Diet and appointed by the prince.

The Diet is a unicameral body composed of 15 members, elected by direct suffrage for 4-year terms. Voters in 1987 approved a referendum to raise the size of the Diet to 25 members, effective in 1990. Women are allowed to vote on national questions and, in some areas, on local candidates and issues.

Liechtenstein has an independent judiciary, with three levels of regular courts, an administrative court, and the State Court of Justice. For administrative purposes, the principality is divided into 2 districts and 11 communities.

Liechtenstein has two principal political parties, the Patriotic Union (Vaterlaendische Union--VU) and the Progressive Citizens' Party (Fortschrittliche Burgerpartei--FBP). Philosophically, they are much alike, and both favor maintenance of the monarchical state.

From 1928 until 1970, the Citizens' Party formed the parliamentary majority; in the 1970 general election, it was superseded as the majority party by the Patriotic Union, but it regained the majority of votes in the 1974 election to the Diet. As a result of the 1978 election, the Patriotic Union resumed power, gaining 8 of 15 seats in parliament. Since 1938, both parties have formed a coalition government.

In routine diplomatic matters, Liechtenstein is represented in the United States by the Swiss Embassy, at 2900 Cathedral Avenue, NW, Washington, D.C. 20008 (tel. 202-745-7900).

ECONOMYDespite its small size and limited natural resources, Liechtenstein has developed, during the last three decades, from a mainly agricultural to a highly industrialized principality. It now has more than 50 factories, producing a wide range of highly specialized articles, especially in small machinery. Industrial goods are produced almost exclusively for export. In addition to membership in the European Free Trade Association, the principality has a special trading agreement with the European Community. Although the domestic labor force of 7,490 is highly skilled, its size has proven inadequate for an industrial economy; therefore, about 9,631 foreign workers (1985 figures) are employed in Liechtenstein, mostly from Switzerland, Austria, Germany, and Italy. Of the total labor force, about 52.6% are employed in industry, crafts, and building; 45.3% in the professions, services, and other occupations; and 2.1% in agriculture and forestry.

The principality was economically integrated with Switzerland by the 1923 Swiss-Liechtenstein Customs Treaty, which provided for a customs union, the use of Swiss currency, and other types of economic cooperation. As a result, Liechtenstein has shared in the prosperity of the Swiss economy. Nominal GNP in 1980 was estimated at 876 million Swiss francs (about $584 million at 1988 exchange rates). Real GNP in 1970 prices was 527.7 million Swiss francs ($352 million). Per capita GNP is difficult to determine because about 25% of the labor force commutes from other countries; however, in 1980 it was estimated at $23,200.

Liechtenstein has a market economy. Because of the principality's liberal tax policies, strict bank secrecy, and political stability, several thousand foreign businesses have their nominal headquarters in Liechtenstein. Revenue from the many tourists who visit the principality annually and the sale of postage stamps to collectors also are important sources of revenue.

Liechtenstein's banks form an increasingly important part of its economy. Three banks are domiciled in Liechtenstein with total combined assets of $7.4 billion. (Such combined assets would rank as the seventh-largest bank in Switzerland.) Liechtenstein's banks have grown rapidly in recent years. Banking also is becoming an important employer, at the present accounting for 4.5% of the labor force.

Austrian Federal Railways owns and operates the rail system in Liechtenstein, but few international trains make stops. A major highway runs through the principality, linking Austria and Switzerland. Postal buses are the chief means of public transportation. Liechtenstein has no airport. Two newspapers are published, but there currenly are no radio or television broadcasting facilities.

FOREIGN RELATIONSLiechtenstein is a member of the Council of Europe at Strasburg and participates, by virtue of a separate protocol, in the European Free Trade Association. The principality has become an active participant in the Conference on Security and Cooperation in Europe.

In a series of treaties concluded after World War I, Switzerland assumed responsibility for the principality's customs controls, consular matters, and routine diplomatic relations. Liechtenstein deals directly with other states when major treaties or international conferences are involved.

The only diplomatic mission Liechtenstein maintains is its embassy at Bern, Switzerland, through which the Swiss Foreign Ministry conducts most of the principality's routine foreign affairs. Liechtenstein also has a nonresident ambassador in Vienna and a permanent representative to the Council of Europe in Strasbourg.

U.S.-LIECHTENSTEIN RELATIONSThe United States has no diplomatic or consular mission in Liechtenstein. The U.S. Consul General at Zurich, Switzerland, has consular accreditation at Vaduz.

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